Fed bail out. How do you feel?

[Ben's Car Wash]

So we are all "Capitalist" right? And if we make a bad choice, poor judgement or just bad timing in when or where we build.... and we go under.... is someone gonna shore us up? Capitalism is brutal. Failures happen and they suck. Something like 50% or more startups go out of business in the first year. Yet the Fed wrote something like 35 million Friday to Bears Stearn's until Chase bought them at $2 a share (from a high last year of $150 a share). Now if the Fed doesn't get the 35 million back... they "write it down" that is as a "loss". That means you and I foot the bill to shore up Bears Stearns because they took risk... and failed!

Personnally... I'm apppalled! Sure it would have sent a shock wave through the financial markets. Sure others might fail.... but that is CAPITALISM. For a government to subsidize or bail out businesses is SOCIALISM or FASICISM. IMO... it delays the bottom, the eventuality.... let it happen so we can recover QUICKLY! Instead we're going to be subject to 3-4 more big investment bank bailouts over the next few months (and we haven't even hit the 1st Q of 2008 yet).

Just wonder where YOU GUYS FALL? I guess I'm just a LIBERAL RIGHT?

 

[Waxman]

I can see your point. Market corrections are a natural part of a free-market, capitalist economy.

 

[chadrpalmer]

near as i can tell, its been a long time since weve truely been a pure capitalist society, at least since the great depression. i grew up dirt poor, so recessions never affected my family much, we had little to lose. we grew food, hunted, etc..., so inflation didnt hurt as much. what hurts it so see the taxes we pay going to bail out corporate america. im not real good at comrehending macroeconomics, so maybe there's a great reason for this all, but in my narrow microeconomic mind, it sucks. then again, if we could take all the money we are dumping into iraq and spend it here in the usa, i think we would be in a lot better position. praise the lord, at least exports are booming!

 

[jfmoran]

Doug,

While on the face of it I might tend to agree with you, what is occurring right now is certainly not a sign that we are not a "Capitalist Society." Within capitalism are many "theories" of economics, and right now basically everything our government is doing and has been doing is based on Keynesian Economic Theory. Deficit spending, lower taxes, increased government spending and encouraging spending during an economic downturn (hence, the "rebate" checks) are all classic examples of Keynes economic theory. All of these "tactics" are clearly "anti laissez-faire" economic theory, which cringes at any government bail-outs. Both of these theories as well as many others are all part of our capitalist society and have been since our inception. While we may not agree with what they are doing, many economists believe (and let me just state right now, that 3 different economists will tend to give you 3 different opinions) that the laissez-faire policies of the federal government, as well as the Fed's tight monetary policies caused and lengthened the severity of the Great Depression.

I believe everything we are seeing right now is our government trying to keep us out of a Depression (never mind a Recession).

Time will tell, whether or not there "theories" work.

John Moran

 

[chadrpalmer]

harry truman said

"a recession is when your neighbor loses his job....a depression is when you lose your job."

 

[bmills]

These actions are just a modern day version of the CCC, WPA, TVA, Chrysler, Resolution Trust CO, Silverado Savings, etc. Government always knows what's best for us taxpayers. Once the money reaches Washington it becomes their money and ceases to be ours.

My dad used to say, "What's this country coming to?". Now I have become my dad!

 

[Alan Bussey]

The right move at the right time. The fed is acting all of our interests. Good job.

 

[pitzerwm]

Doug, you missed the fact that when the Fed started taking the mortgage's as collateral, it discounted them to junk. If the "bank" take them back no change, if they don't the Fed will more than likely make money, because the actual percentage of the defaults will not meet the discounting.

 

[Greg Pack]

I believe it is a great move- for the bankers. The heroin addict needs another hit. We the people are going to subsidize it. It will provide short term stimulus to wall street. The free flow of cheap money is what greases the skids of our buy now- pay the rest of your life economy. If this money supply shuts off we will actually have to learn to live within our means. But com'on -what's another 30 billion added to our tab?

It's amazing how timeless some things are:

" I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)

 

[Ben's Car Wash]

It's amazing how timeless some things are:

" I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)

Well another of Tom's qoute come to mind for me "the tree of liberty from time to time must be refreshed with the blood of tyrannts and patriots"! Jefferson thought that for this Nation to survive, we had to actually have armed revolts against our government about every 50 years or so..... that only happend once!

I'm sick to see that it's more important to help the CEO of BEARS STEARNS (who was away playing Bridge all week an never knew his business was in such poor shape) unload his business (while keeping his multi-million $$$$$ salary, pentions, homes....etc.... yet we can't help poor kids, homeless vets, or eldery who can't afford to heat thier homes!

Like some one said up thread.... "what's this Country coming too?" And yet many American claim that we are a "Christian Nation, built on Christian principles".... we only seem to care about a WAR for OIL (only defended the oil ministry when we invaded), Had 1 million Christians flee Iraq because it's no longer safe for them there after 1900 years (see the Catholic Preist murdered last week Chaldean), Can't fix our bridges, kids HS drop out rates..... but we bail out big financial centers!

I'm again stuck with another quote.... I guess one of you could identify it for me "For where your treasure is, there your heart will be also"! or "You shall know them by thier fruits".

Thanks for showing who cares.

 

[jfmoran]

Doug,

How about the 14,000 jobs that were saved at Bear Stearns, I guess those people don't matter?

I love how you mock the "Christians" and then throw scripture out as some sort of guilt trip.

How about I throw this one out: 2 Thessalonians 3:10: from "The Message"

10 -13Don't you remember the rule we had when we lived with you? "If you don't work, you don't eat." And now we're getting reports that a bunch of lazy good-for-nothings are taking advantage of you. This must not be tolerated. We command them to get to work immediately—no excuses, no arguments—and earn their own keep. Friends, don't slack off in doing your duty.

I'm pretty sure that one won't go over to well in our welfare minded, hand out to the government society. Maybe our government would have the money to do the things you are talking about if we didn't have so many social programs.

 

[pitzerwm]

Doug, You should get off your box, the CEO lost whatever his stock was worth, and everyone else did too, don't you pay attention to anything but the whack jobs on talk radio? The FED made the shares worth $2, the day before they had been worth $34 or so. He will be gone soon and other than whatever the employment contract calls for he will get nothing else. I love your "take all the money away from the rich and give it to the poor". You must really have a dilemma making money as a capitalist, with your radical social leanings. A lot of our rich politicians must be feeling guilty with all their money, but instead of giving their money away they want to take your money and give it away, sound familiar?

 

[Ben's Car Wash]

Doug,

How about the 14,000 jobs that were saved at Bear Stearns, I guess those people don't matter?

I love how you mock the "Christians" and then throw scripture out as some sort of guilt trip.

How about I throw this one out: 2 Thessalonians 3:10: from "The Message"

10 -13Don't you remember the rule we had when we lived with you? "If you don't work, you don't eat." And now we're getting reports that a bunch of lazy good-for-nothings are taking advantage of you. This must not be tolerated. We command them to get to work immediately—no excuses, no arguments—and earn their own keep. Friends, don't slack off in doing your duty.

I'm pretty sure that one won't go over to well in our welfare minded, hand out to the government society. Maybe our government would have the money to do the things you are talking about if we didn't have so many social programs.

John, It's called bieng a hypocrite. When we say we care about certian things but our action show other wise.... well what can be said of it? Save 14,000 jobs? Great, I'm glad we won't be paying their SOCIAL PROGRAMS.

I don't have a welfare mind... I work 40-50 hours a week at the hospital and 30-40 at my washes plus on call. Like I said on other post.... fine stop all social programs. Seems that the money only goes to the groups that can vote or give large donations to political parties.

As far as your qoute of scripture... that was Paul (the tentmaker formerly known as Saul) reminding Jews of thier old and own laws (they had 667 of them) to which they would break or not follow, or selectivly follow.

 

[phred113]

The bailout (or jiggered sellout) was deemed in the best interest of all stakeholders, not to mention the financial markets. The same arguments are made for every social program - the greater good. There are real esoteric financial explanations about this deal, but suffice it to say that it was made to stop a perceived panic. The next day they started talking about dropping the Fed funds rate, a full day before they were to meet.

Doug: Please cover your ears (or in the case your eyes): The USA economy is the most beneficial market for everyone in the world because we are the envy of the world. The world markets rely heavily on our markets and economic well being. Not to sound too Orwellian, but....all countries are equal, but we just happen to be more equal than others.

World economic interdependence requires that the USA behave in a more prudent, fiscally responsible way than any other country. More is at stake if we fail. To that end, a "Black Friday" event will cause worldwide financial hardships. The 'bailout' (er, Mr. Bear Stearns, ah, you can leave, now... - The Fed) was necessary to stem the perceived panic and stem the tide of worry. Yes, the act looked desperate to us, but the 'others' see it a signal we take world concerns serious enough to throw someone under the bus. So, if your (not addressed to anyone, just the collective) focus is how we look to everyone else and their opinions of US (usually the ones that find fault in most everything in this country - except themselves) this was a good move. If you own a business, this was a little unnerving. And, if you are an investor, well your broke by now anyway....

 

[Greg Pack]

watching CNBC today and they had a guy on there that said the worst of the ARM rests were coming later this year.

This is a pretty good intro to subprime

http://docs.google.com/TeamPresent?docid=ddp4zq7n_0cdjsr4fn&skipauth=true&pli=1

 

[PaulLovesJamie]

The fed is acting all of our interests.

wow - I could not possibly disagree with this statement more.

Regarding the bailout, I believe it was the wrong thing to do.

 

[jfmoran]

wow - I could not possibly disagree with this statement more.

Regarding the bailout, I believe it was the wrong thing to do.

Care to elaborate? Not a trap, just curious as to your take.


John

 

[SCS]

I think a number of you have alot of your facts wrong. Correct me if I'm wrong (which is possible since I haven't followed this closely since I've been traveling) but I believe what happened is this. Bear Stearns (one of the worlds largest investment houses) had an extreme liquidity crisis. This was largely brought on by losses they suffered last year from sub prime mtg funds that lost value. Our entire financial system is based on the creditworthiness of these institutions who daily trade billions of dollars amongst themselves all over the world with nothing but their credibility backing up their actions. They needed a large amount of cash immediately in order to be able to follow through on their trading comitments with other institutions. There was not enough time for a typical acquisition or loan. JP Morgan was interested in acquiring them as Bear Stears still was a very valuable firm just suffering from a liquidity problem. To solve the liquidity problem the federal government gave a short term loan to JP Morgan for the purpose of loaning the money to Bear Stearns to prevent them from failing until JP Morgan could buy Bear Stearns. The government took as collateral sub prime mtg assetts. The government has made similar short term loans with similar collateral available to virtually all banks and investment firms now. The real fear the fed was attempting to avoid was they did not want to see a major investment firm unable to meet its obligations which would cause a run on Bear Stearns that would no doubt have spread to many of the others in the industry who have weak finances at the moment. When you hear people can't get their money out of Bear Stearns you may decide to pull all of your money out of Lehman because your afraid it might end up in similar circumstances. Thus the fed avoided a typical run on the bank mentality that very likely could have damaged world financial markets in a very big way.

 

[SCS]

Doug, you've got alot of nerve complaining about the bailout. Every social program you are so fond of is a bailout.

Should the fed have done this? Well that depends. It certainly is consistent with the way our government operates, why should it fly in the face of capitalism and do all of the other bail outs and supports and not this one. This one certainly is more important than many of the others in the past (especially my least favorite bail out the 9/11 bail out).

Theoretically, I am against them all but this one makes more sense than many. I also profited exceedingly well from this particular one which makes me alot less upset about it!!

 

[Ben's Car Wash]

Scott, I'm not fond of any socail program that's not equitable, constitutional or legal.

For you information what the fed has never been done before.

{AMY GOODMAN: We are seeing some of the worst crises we have seen in decades, whether we’re talking about the economy, whether we’re talking about the war, and those two issues, we’re going to take on today.


JUAN GONZALEZ: Yes, we are. Well, Wall Street and the nation’s economy is in a state of crisis. The nation’s fifth largest investment bank Bear Stearns nearly collapsed last week. It was saved only after the Federal Reserve took extraordinary measures to help JPMorgan purchase the eighty-five-year-old firm.


As part of the deal, the Fed put up $30 billion to guarantee Bear Stearns’s riskiest investments. For the first time ever, the Federal Reserve has become the lender of last resort for other investment banks in an effort to prevent firms from going under. It is a move that marks one of the broadest expansions of the Fed’s lending authority since the 1930s. At least ten investment funds, including the fund Carlyle Capital run by the Carlyle Group, have recently collapsed or been forced to sell assets.


Consumers are feeling the effects of the economic crisis everywhere. Food prices are rising. Gas prices have reached all-time highs. The dollar is weakening. Credit card debt is expanding. Home prices are falling. And foreclosures continue to rise. }

I spoke to my banker the other day who said he heard an interview of employees of Bear stears who lost hundred of thousands in stock, investors who lost BILLIONS. BS was know as a "COWBOY" invesment firm. They took on over 20X the risk. Why should "WE the PEOPLE" bail them out? It is after all OUR MONEY the govenment is giving out! And what was the "social benifit" to this progam social progam? 14,000 saved jobs for 30 billion dollars? What was the "COST" of that 30 billion dollars? a loss of 400 million, 60 billion, 200 billion hell the sold the actuall building for a tenth of its appraised value! So the economics actually caused a DEFLATION in the market place with the bailout! And every other distrassed bank will expect the same or not change their policies of taking on poor credit & risk.

But I'm only a leftest, commie ba$tard, Amerika hating fool aren't I? Again, go get your facts. This is the FIRST TIME IN US HISTORY THIS HAS BEEN DONE.... JUST LIKE INVADING A NATION THAT NEVER ATTACKED US!